Which of the Following Explains the Debit and Credit Rules

question 84

Multiple Choice

Which of the following explains the debit and credit rules relating to the recording of revenue and expenses?

• A) Expenses appear on the left side of the balance sheet and are recorded by debits; revenue appears on the right side of the balance sheet and is recorded by credits.
• B) Expenses appear on the left side of the income statement and are recorded by debits; revenue appears on the right side of the income statement and is recorded by credits.
• C) Revenue increases owners' equity and is recorded by a credit; expenses decrease owners' equity and are recorded as debits.
• D) The realization principle and the matching principle.

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Definitions:

Equivalent Units

A concept used in the cost accounting process that expresses the amount of work in process and finished units as a total of equivalent complete units.

Cost Per Equivalent Unit

A calculation used in process costing that assigns a cost to partially completed units, making them equivalent to fully completed units for inventory valuation.

Finished Goods Inventory

Products that have completed the manufacturing process but have not yet been sold or distributed to customers.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of production costs.